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Catalent To Acquire Gene Therapy Leader Paragon Bioservices For $1.2 Bln

Contract drug manufacturer Catalent, Inc. (CTLT) agreed Monday to acquire all outstanding equity of closely-held Paragon Bioservices, Inc. for $1.2 billion in cash on a cash-free, debt-free basis. It will provide Catalent new expertise and capabilities in one of the fastest-growing areas of healthcare, positioning it for accelerated long-term growth.

Paragon is expected to achieve more than $200 million in revenue in calendar year 2019, with nearly 90% of this revenue target already reflected in signed contracts.

Catalent expects the transaction to be accretive to its adjusted net income per share in the second full fiscal year after closing, and significantly accretive thereafter.

Catalent intends to fund the transaction with the proceeds of a $650 million incremental term loan under its existing senior secured credit facilities and the issuance of $650 million of a new series of convertible preferred stock to funds affiliated with Leonard Green & Partners, L.P. (LGP), although the acquisition is not subject to a financing condition.

Catalent will use the funds remaining from these financings, after the payment of the purchase price and the fees and expenses associated with the transaction, to pay a portion of the costs of capital expansion projects currently underway at Paragon's facilities in Maryland, with the remaining costs to be paid with cash on hand. The incremental term loan and the issuance of the convertible preferred stock are each conditioned upon the closing of the acquisition.

The transaction is subject to customary closing conditions, including the expiration of the waiting period under the U.S. antitrust laws, and is expected to close in the second quarter of 2019.

Upon completion of the transaction, Paragon's entire organization will remain under the leadership of Pete Buzy, with its industry-leading management team and approximately 380 employees joining the Catalent team.

In conjunction with the investment in Catalent by the LGP funds, Peter Zippelius, a Partner at LGP, will join Catalent's Board of Directors, marking the beginning of a long-term strategic partnership.

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